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Ratepayer Funded DWP is Not LAUSD’s Sugar Daddy

01Jul2011

Written by Jack Humphreville

LA WATCHDOG - In light of the Department of Water and Power’s proposed rate increases and their impact on students, Dr. John Deasy, the Superintendant of Schools for the Los Angeles Unified School District, has requested that DWP “develop a discounted utility rate structure for educational institutions like LAUSD.” This would include both public and private educational organizations in order to comply with state law. Fortunately for Ratepayers, state law prohibits a separate rate structure for LAUSD.

In his undated letter to DWP General Manager Ron Nichols, Deasy said that LAUSD is DWP’s largest customer with estimated billings of $67 million for the 2011-12 fiscal year. Deasy also states that the projected rate increases of 5% to 6% a year would increase LAUSD’s costs by $3 to $4 million a year, putting an additional burden on LAUSD’s already strained $6.5 billion General Fund, “reducing educational resources and placing jobs for teachers, principals, librarians, and other support staff at risk.”

While LAUSD may perform a noble service, it should not receive any preferential treatment or terms unless they are available to all commercial and residential customers.

Nor should residential or commercial Ratepayers be forced to subsidize the notoriously inefficient LAUSD. This would result in an even greater increase in rates, a fact that conveniently alluded Deasy as did the total cost of this self serving request.

And such an arrangement, no matter how well intentioned, is a precedent that has the potential to be a very expensive burden on DWP and the Ratepayers, further eroding the Ratepayers’ trust in DWP and City Hall.

It is easy to imagine one of our good hearted elected chuckleheads, starting with the Mayor, using the proposed LAUSD deal as a precedent to justify even more rate breaks for their cronies and other politically connected organizations.

As it is, the City is already subsidizing LAUSD since the school system is not subject to the 10% City Utility Tax. This will result in a savings for LAUSD of $6.7 million, a fair amount of change for our barely solvent City.

As a matter of interest, about 10% of the DWP’s power revenue base is exempt from the 10% City Utility, costing the City over $30 million a year.

And Ratepayers are already doing more than their fair share as DWP is the largest single source of cash for the City’s General Fund. In addition to the 10% City Utility Tax that raises more than $300 million a year, the Ratepayers are socked with an additional $250 million associated with the less than transparent 8% Power System Transfer Fee.

This $550 million is augmented by “public benefits” of over $50 million, low income and lifeline subsidies for 300,000 customers that now cost over $60 million, and numerous pet projects for the Mayor and the Council Members.

DWP has also absorbed over 1,600 less than qualified City employees who arrived on DWP’s door step bearing unfunded pension liabilities of around $200 million.

And this does not even include the IBEW Labor Premium that is estimated to cost Ratepayers more than $250 million a year. But this is only fair payback since Union Bo$$ d’Arcy has been a very generous contributor to the campaigns of Mayor Villaraigosa, Controller Wendy Greuel, and other local politicians.

And any preferential treatment of LAUSD is inconsistent with the City Administrative Officer’s “full cost recovery” policy where the City’s Library Department and Department of Recreation and Parks are being squeezed to fund their share of the City’s DWP bill.

Even so, this proposed subsidy may be subject to Proposition 26, the Supermajority Vote to Pass New Taxes and Fees Act, which was approved by a majority of the voters in November.

This cynical, pull at our heart strings, poorly researched, and illegal scheme is just another stunt by the political establishment to raid DWP at the expense of the Ratepayers. It establishes a horrible precedent that has the potential to increase our power rates even more than the proposed 26% over the next two and a half years.

If the City Hall wants to subsidize LAUSD’s power bill, that is their decision. But not on the Ratepayers’ dime! Any subsidy is the Taxpayers’ responsibility and must be approved by the voters.(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com. He can be reached at: lajack@gmail.com ) –cw